Fears over £1bn pensions shortfall (From The Argus)

Fears over £1bn pensions shortfall

12:00pm Tuesday 16th March 2010 in

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pension funds run by Sussex councils have been left with a shortfall of almost £1 billion because of stock market turmoil.

Local authorities admitted pension funds set up to pay for the retirement packages of council workers had nowhere near enough money in them to cope with demand.

Officials said the world financial crisis and former employees living longer were to blame for the hole in the funds. They warned they may have to put millions of pounds of council cash into the funds – sparking fears taxpayersmay be left to foot the bill for the shortfall.

Last night there were calls for local authorities to scrap the “unsustainable”

generous pension schemes and replace them with cheaper deals.

John O’Connell, of the TaxPayers’ Alliance, said: “These deficits are a huge ticking time-bomb.

“Investment portfolios will have taken a beating in the credit crunch but that is only part of the problem.

“No matter how good the markets get, the fact is local authorities are running unsustainable final salary schemes which are now all but extinct in the private sector.”

Graham Cooper, of Grange Financial Services in Ovingdean, Brighton, said many private firms which faced similar problems had scrapped expensive schemes. He said: “Whenever there is a deficit this has to be matched by either the employee or the employer.”

Figures from the TaxPayers’ Alliance suggest councils in Sussex had a pension deficit of £957.4 million last year – 77% higher than the £539.9 million shortfall a year earlier.

It included deficits of £262.6 million for East Sussex County Council, £289.9 million for West Sussex County Council and £138.9 million for Brighton and Hove City Council.

The report is based on contributions to the Local Government Pension Scheme, which affects most people working in the public sector.

Employees, including teaching assistants, lollipop men and women and refuse workers, currently contribute between 5.5 and 7% of their wage into the pension fund.

Alex Knutsen, general secretary of Brighton and Hove branch of Unison, said there could be a review of pension policy, which would mean employers paying more into their fund, but the union was “pretty confident”

the current agreement would be robust enough to cope.

Local government pension schemes are valued every three years by independent actuaries and the amount councils pay in are adjusted if necessary.

A spokesman for the Local Government Association said a snapshot of the figures was misleading because pension pots were managed on a long-term basis. He added there was enough in the pot to cover the next 20 years of pensions.

East Sussex County Council did not expect to have to make any “significant”

increase into the amount it put into the fund. West Sussex County Council said shortfalls were funded over long periods so council taxpayers were not required to pay a lump sum to wipe the deficit.